Oil spill claimants are voicing legitimate concerns about method to calculate losses


Kenneth Feinberg, administrator of BP’s $20 billion compensation fund, asked for public comments after he released details last week on how he plans to estimate final payment offers. Hundreds of claimants have responded, and Mr. Feinberg needs to consider some valid suggestions to his claims process.

Paramount among them is the concern, raised by several claimants, that Mr. Feinberg needs to revise the time frame he plans to use to tally losses. Mr. Feinberg wants to measure losses from May to December 2010 by comparing the claimants’ income in that eight-month period with their income in the same period in 2008 and 2009. He said most claimants would be paid twice their oil-related losses in 2010.

But that method leaves out a comparison of the first four months of 2010, when many area companies were showing a recovery from the economic doldrums of the previous two years. “My income for Jan-May 2010 is greater than the past two years and I have backup documentation to prove it. Why can’t that be taken into consideration when projecting future losses?” a Louisiana business owner asked online.

It’s easy to see why Mr. Feinberg proposes a May-to-December period to estimate losses. The time frame covers the spill and several months afterward and can be easily compared to the same months in the previous two years – a convenient factor for seasonal businesses like fisheries. But using a period from May 2010 to April 2011, and comparing it to the previous 24 months could yield a more accurate projection of future losses for many claimants.

Other claimants are asking what businesses will be eligible for the extra compensation offered for oyster “harvesters” or how Mr. Feinberg will calculate losses for new companies in 2010. Offshore rig suppliers want Mr. Feinberg to make them eligible to recover losses from the government’s official and de-facto moratoriums on deepwater drilling. He needs to answer all these queries.

The caveat in all of this, of course, is that claimants don’t have to opt for a final settlement now. They can continue seeking interim payments for their actual losses, especially if they think their total losses will be higher than twice the amount lost in 2010. That’s a viable option only for claimants who have the cash flow to wait for reimbursement, though. In addition, claimants can opt out of the claims process and sue BP directly in court.

Mr. Feinberg has vowed to be fair so that claimants don’t have to engage in long and expensive court battles with BP, and that’s a worthy goal. Taking into consideration the suggestions from claimants is one way to better achieve that goal.

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Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
Cooper Law Firm

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